January 25, 2010

Vikings float suburban stadium, federal stimulus subsidies

It was a momentous weekend for the Minnesota Vikings in more ways than one: On Friday, team execs floated a new stadium plan featuring — you guessed it — federal stimulus subsidies.

A new wrinkle developed in the Minnesota Vikings' stadium strategy on Friday, when team officials said they are looking at federal stimulus money to help them build a new home that just might be located in the suburbs. ...

To help finance the deal, the Vikings are exploring federal Build America Bonds, along with a possible 2 percent increase in the hospitality tax across the seven-county metro area.

Build America Bonds are a seriously weird financial instrument: Designed to kick-start those "shovel-ready" construction projects we've heard so much about, they're not tax-free like typical federall subsidized bonds. Rather, they achieve the same effect by having the federal government match 35% of the payments to bondholders — effectively allowing the local government that issues the bonds to offer a lower interest rate, since bondholders are getting a bonus on top of that. In its first year local governments issued about $50 billion in Build America Bonds, putting the feds on the hook for about $1 billion a year in subsidies, a number that will rise as more bonds are issued.

Vikings stadium executive Lester Bagley says that Build America Bonds could be used for about $1 million a year in stadium bond payments, which is a really piddly amount on a projected $870 million stadium. A state budget official also told the Minneapolis Star Tribune that it would have to study whether an NFL stadium could be considered a "governmental purpose" under federal tax law. You know that stadium-hungry teams are going to be watching this one with bated breath.

If nothing else, from the sound of this suburban gambit, it seems as if Bagley is trying to set up a bidding war among Minneapolis and the surrounding suburbs to be the Vikes' new home. (Not that that worked so well last time.) At least they don't seem to be waving the Los Angeles threat too overtly — though Bagley did warn last week, in typical non-threat threat fashion, that "it's clear that in order to retain the Vikings for the next generation in Minnesota, we have to resolve our stadium issue."